Key Takeaways
A consumer proposal must be completed within 60 months but can be completed in a shorter period with higher, more frequent, or lump sum payments.
When financial troubles arise, many Canadians consider a consumer proposal as a way to manage their debts. How long does a consumer proposal take? This question is frequently asked by those seeking debt relief. Understanding the timeline of a consumer proposal helps individuals make informed decisions about their financial future and plan accordingly.
The duration of a consumer proposal can vary depending on several factors. While some proposals may be completed in as little as a few months, others can last up to five years. This article explores the key timelines in a consumer proposal, factors that can extend the process, and strategies to shorten its duration potentially. By examining these aspects, readers will gain valuable insights into how long they might expect to pay a consumer proposal and how it could impact their financial journey.
Key Timelines in a Consumer Proposal
Filing to Approval (45-60 days)
The consumer proposal process begins with a Licensed Insolvency Trustee filing a consumer proposal to the Office of the Superintendent of Bankruptcy and notices to all unsecured creditors, which initiates an immediate stay of proceedings. This halts all collection activities for all unsecured debts from collecting debts owed and charging interest. After filing, creditors have 45 days to consider the proposal and file their proof of claim and voting letter. If 25% of proven creditors vote against the proposal, then the Licensed Insolvency Trustee must call a meeting of creditors within 21 days from the 45th date after filing.
If more than 50% of creditors (by dollar value) accept the offer, the proposal becomes legally binding on all creditors. Following acceptance, there's a 15-day period for potential court review requests. If no requests are made, the proposal is deemed court-approved on the 60th day.
Repayment Period (0-5 years)
The repayment period for a consumer proposal must be completed within five years or 60 months. Many Licensed Insolvency Trustees recommend a 60-month period to spread out payments and reduce monthly installments. However, debtors may choose a shorter period to pay off the proposal or offer a lump sum amount at the beginning or end of the proposal term. Individuals have the flexibility to pay off their proposal earlier if their financial situation improves.
Credit Report Impact (3-6 years post-completion)
A consumer proposal affects your credit score for a period after it is filed. TransUnion removes the proposal from credit files three years after satisfaction or six years after the default date, whichever comes first. Equifax follows a similar timeline, removing the proposal three years after debt repayment or six years from the filing date, whichever is earlier. During this time, the proposal is coded as an R7 on credit reports, indicating a debt settlement arrangement with creditors.
Factors That Can Extend the Process
Creditor Objections
Creditors have 45 days to accept or vote against a consumer proposal. If the majority votes against the proposal, the process may be prolonged. In Division I Proposals, rejection by creditors leads to automatic bankruptcy. There's no automatic bankruptcy for Consumer Proposals, allowing for potential amendments to the terms, such as increasing the amount offered to creditors.
Amendments to the Proposal
If a consumer proposal is not accepted, changes can be made and resubmitted to the creditors. This process of negotiating and amending the consumer proposal terms can extend the overall timeline for approval of the consumer proposal, as a meeting of creditors is required to solidify the creditor's approval of the consumer proposal.
Court Interventions
After acceptance, the consumer proposal is potentially reviewed by the court within 15 days. The Office of the Superintendent of Bankruptcy may intervene in court proceedings if necessary, which can significantly lengthen the process. If no request for court review is made, the consumer proposal is deemed accepted.
Strategies to Shorten the Duration of Consumer Proposal
Lump Sum Payments
One effective strategy to shorten the duration of a consumer proposal is to make lump sum payments. Individuals can use financial windfalls, work bonuses, family assistance, or extra income to pay off their proposal earlier. There is no penalty for early repayment. This approach allows repayment flexibility and can significantly reduce the overall duration of the proposal.
Increasing Monthly Contributions
Another method to expedite the process is to increase monthly payments. While the repayment terms are fixed once the proposal is accepted, debtors can pay more than the agreed amount. Changing payment frequency from monthly to bi-weekly can result in an extra monthly payment. Even small increases in payment amounts can make a substantial difference over time, helping to repay the proposal earlier than initially scheduled.
Conclusion
The journey through a consumer proposal in Canada significantly impacts an individual's financial life. Understanding its timeline, from filing to completion, enables Canadians to make informed choices about their debt management strategies. While a consumer proposal must be completed within 60 months, the duration can be shortened through strategies like making lump sum payments or increasing monthly contributions. This flexibility allows individuals to adapt their repayment plans to changing financial situations.
A consumer proposal offers a structured path to debt relief. Individuals can navigate this process effectively by working closely with a Licensed Insolvency Trustee and staying committed to the repayment plan. The ultimate goal is to emerge from the proposal with a fresh financial start and improved money management skills to build a more stable financial future.
Drowning in debt? Take control now! Complete our quick form for a free, no-obligation consultation and discover how you could slash your debts by up to 80%. Don't let financial stress hold you back any longer – your path to financial freedom is just a click away!
Transform Your Finances Today!
FAQs
1. What occurs once the initial 45-day period of a consumer proposal is over?
After the 45-day review period, if the consumer proposal is accepted by the creditors, an additional 15 days are allowed to pass for court approval. This period ensures the proposal is set to be legally approved by the court. During this time and afterward, creditors cannot retract their acceptance of the consumer proposal.
2. Are there any penalties for completing a consumer proposal early?
No, there are no penalties for completing a consumer proposal early.
3. Are there any disadvantages to using a consumer proposal for debt resolution?
Utilizing a consumer proposal to manage debt negatively impacts your credit report, with an R7 rating. However, this has a short-term impact on your credit, but it provides the long-term gain of debt relief and the opportunity to rebuild your credit.
4. How can I confirm if my consumer proposal has been approved?
Your consumer proposal is considered approved if the majority of your creditors, based on the dollar value of proven claims, vote in favour of it. The court then affirms this approval. Your Consumer Proposal Administrator will advise you once your proposal is approved.
Comments